When it comes to evolving payment models, CFOs have an opportunity to revamp their playbook for strategic decision making—and drive big wins.
One of the biggest challenges healthcare organizations face remains lack of readiness for evolving payment models—but it’s also a problem healthcare CFOs can do something about.
Our recent survey found 87 percent of healthcare CFOs don’t believe their organizations are very well-prepared to manage evolving payment models using existing financial tools and processes. Moreover, their confidence has decreased in the past year. Another red flag:
77% of CFOs lack confidence in their team’s ability to quickly adjust business strategies and plans in a rapidly transforming environment
How did we get to this point? The move away from fee for service toward value-based payment has been a long time coming. In fact, Michael Leavitt, former secretary for the U.S. Department of Health and Human Services, estimates we’re 25 years into a 40-year healthcare value journey. But many healthcare organizations have been slow to adapt their financial tools and processes. As payment programs like MACRA gain momentum, these organizations struggle to gain insight into how well they’re performing and what it would take to elevate performance. This leaves hospitals and health systems playing defense instead of offense: responding to the impact of new payment models instead of leveraging data-driven insight to take charge of their future.
How can healthcare CFOs revamp their strategic decision-making playbook for a value-based payment environment? Our work with hospitals and health systems points to four key action steps.
Step #1: Dig Deeper
Just as sabermetrics (think Moneyball) revolutionized baseball scouting and analysis, in a rapidly changing healthcare environment, healthcare finance teams must possess expertise in predictive analytics to spot emerging trends and quickly course-correct when needed. They also need tools that deliver a comprehensive view of performance across dimensions—in real time. This requires investment in:
- Benchmark-rich databases that position leaders to compare their performance against organizations of similar size and type
- Tools to measure core dimensions of performance that impact value—not just clinical outcomes, patient experience, and financial health, but also operational efficiency, strategic growth, and employee growth and retention rates
- The ability to access critical performance data from one system, empowering leaders to more effectively measure, monitor, and manage performance under value-based payment models
Our research shows that when all the data needed to evaluate performance reside in one system that can be accessed by managers and leaders alike, this builds commitment to sustainable performance monitoring—and boosts performance.
Step #2: Think Boldly
At a time when healthcare CFOs have more data to draw from than ever, 94 percent fear they are unable to meet the demand for actionable insight. This includes the ability to leverage data to elevate strategic and tactical decision making as business conditions change.
Scenario modeling is a powerful tool that enables CFOs to quantify the impact
of changes in key business drivers on performance.
By investing in scenario-modeling software, finance leaders can:
- Eliminate—at least in part—bias or aspirational thinking that is not grounded in reality
- Test the strength and flexibility of a strategy under adverse conditions
- Be more proactive in managing risk and uncertainty by modeling scenarios that reflect existing and emerging trends
CFOs and their teams should perform scenario modeling and multi-year projections regularly and use the intelligence gained to guide strategic and tactical planning.
Step #3: Develop a Game Plan for Big Returns
Profitability measurement across specific dimensions is a powerful tool for assessing how specific service lines are performing their impact on the organization’s cost equation. Across the country, leading CFOs are using profitability analyses to inform decisions around right-sizing and right-placing services and facilities. By connecting these analytical results to the organization’s strategic financial plans, healthcare CFOs can help ensure limited resources are allocated effectively.
Step #4: Shorten Budgeting Cycles for “Value Coaching”
46 percent of CFOs say long budget cycles eliminate valuable time for analysis and insights around ongoing and emerging improvement opportunities. That’s likely one reason nearly 40 percent of CFOs say they use rolling forecasting as a complement to the annual budgeting process, which provides opportunities for more frequent and timely performance analysis—critical in an era of evolving payment models.
Bring Your “A” Game to Value Performance
In an era of transformation, it’s not enough for CFOs to focus on the fundamentals of finance. They must also play an integral role in developing, executing, and monitoring the organization’s strategy. By investing in a full range of data analytics capabilities, CFOs can position hospitals and health systems to respond with agility to changing market circumstances—and become one of their organization’s most valuable players.
Performance management software tailor-made for the complexities of hospitals and health system